US Indo-Pacific Strategy, MCC and Nepal

(The following is the original version — in English — of the article “Is MCC part of Indo-Pacific Strategy” by Anil Sigdel; the translation of it to Nepali was published in the Nepalese daily Naya Patrika on January 6th, 2020 ) (the Nepali translation was not by the author Anil Sigdel)

Whether it is US’s MCC or China’s BRI, it is in Nepal’s interests to accept or reject any development finance agreements on the merits of the agreements themselves but not on geopolitical speculations. Therefore, the debate about MCC being part of the US Indo-Pacific policy –a security strategy – thus is potentially harmful for Nepal, is both irrelevant and faulty. First, such approach fails to recognize the fact that, given the nature of the distribution of power in the world, countries like Nepal cannot stay away from a certain regional or international architecture whether one likes it or not. Second, engaging with some but not others goes against Nepal’s guiding principle of “amity with all and enmity with none” and likely jeopardizes Nepal’s neutrality. 

As regards the question that whether MCC is part of the Indo-Pacific policy, the answer is both yes and no. Yes, because the US government has recently adopted the “whole-of-government” approach in which different governmental agencies and business leaders communicate and try to harmonize their policies, especially in the context of China’s so-called “whole-of-society” approach. Because the idea is that in a free society like US, China’s chain-of-command approach would not be possible because the US government does not force its private companies and individuals to pursue governmental goals. And now under the Indo-Pacific policy and the whole of government approach, the White House’s National Security Council takes the lead in enabling communication — which is not always easy —  between different bodies such as MCC, Congress, Treasury, State, Defense, business leaders etc. to work towards the Indo-Pacific policy under the new National Security Strategy.

And No because MCC is an independent governmental body and in the words of its new CEO Sean Cairncross, MCC is “laser focused” on its main work that is poverty reduction through economic growth and large-scale infrastructure projects. In recent interactions in Washington DC, Mr. Cairncross has said that the MCC is “not making a policy decision based on some other strategic concern.” As of 2019, MCC’s most programs are in Africa. And as far as the Indo-Pacific is concerned, the US Department of Defense’s Indo-Pacific Command (IndoPacom) that replaced the erstwhile Pacific Command (Pacom) ends at the islands of Diego Garcia in the Indian Ocean. Any naval cooperation between Indo-Pacific partners such as India and US at present ends at Diego Garcia since from that point on begins the US Central Command (Centcom) area.  Therefore, the MCC is clearly not a major component of the Indo-Pacific, however, with evolving dynamics in Asia, it seems that the US is leveraging MCC funding.

US also wants to see the increasing US-India cooperation translating into an opportunity for South Asian nations — the nations that are least integrated economically. All this explains why the MCC wanted to grant several millions of “compact program” in Nepal and Sri Lanka.  Nepal was also expected to receive some millions more under the Bay of Bengal initiative announced by Secretary of State Mike Pompeo. And the MCC CEO also agrees that although where MCC goes is not determined by strategic necessities, it will have to engage in advancing other US interests since the environment all around is dynamic and challenging.

Here it is important to note that when Secretary Pompeo announced Indo-Pacific policy for the first time, the size of fund he had that time to back his policy was seen as too little. And regarding MCC, the US Congress has never given the fund to MCC that was originally envisaged when established during George W Bush’s administration, although MCC’s model is said to be very successful. And now in Trump administration, there is yet another new governmental agency called Development Finance Corporation (DFC) which again is short of fund, although the main reason to form it was to compete with Chinese investment around the world, especially in Africa. These shortcomings to some extent explain why the MCC is being tied up with the Indo-Pacific policy.

Now in the context of China’s BRI, MCC is increasingly accepting the “whole of government” approach as the MCC CEO clearly puts: “MCC is a great alternative and a great model that just stands in contrast to Belt and Road, which primarily drives debt. It does not engage the civil society component of a country, it isn’t an opening bidding process. And it’s really the antithesis of the sort of knowledge process and result that MCC and the U.S. is trying to provide.”

Therefore, to what extent Nepal’s worries regarding security matters is reasonable? The Indo-Pacific policy or strategy is not something wholly new. Immediately after the Cold War, President Bill Clinton’s National Security Strategy and the subsequent East Asia strategy laid out the policy that saw Asia as the US policy priority. And in the new millennium, under President Obama, Secretary of State Hillary Clinton advanced the policy of “pivot to Asia,” and used the term “Indo-Pacific” in a magazine article of hers. Now, Trump administration formally inducted the term “Indo-Pacific” in his National Security Strategy. Some Defense officials indicate that the new Indo-Pacific strategy report of Pentagon has many similarities with the 1995 East Asia Strategy report. Therefore, policy making is a dynamic process, so one should not be surprised if tomorrow there will be some other strategies, opportunities and challenges. Nepal was, and will be, in one way or the other always under the radar of such larger strategies. It will be wise to make good use of such policies rather than denial or defiance.  

Regarding Nepal’s worry that singing up to MCC might constrain Nepal’s choices, to engage with China in particular, examples show something different. For instance, the US’s neighbor El Salvador, which has been engaged in MCC program since the beginning, recently went to the extent of changing its diplomatic ties from Taiwan to Beijing in addition to signing BRI-related agreements with China. African nation Cote D’Ivoire signed the MCC compact the same year Nepal did so, and subsequently singed China’s BRI. Nepal is also signatory to both MCC and BRI. And if one argues that the Indo-Pacific is US’s security strategy, it is true of China’s BRI as well. Nepal should stay away from getting into such arguments that can be double-aged sword.

And importantly, regardless of the debate about MCC, USAID continues to be the US’s primary instrument of development aid and Nepal has been an important partner. Now there is DFC also as said before. Not to mention all other global financial organizations. Therefore, in one way or the other, Nepal is not disconnected from the US strategy, you can call that by any names. For its part, China definitely has come up with its own international institutions, but China at the same time continues to work with existing organizations that were formed under US leadership.

Finally, it seems that China is very anxious about US Indo-pacific strategy, however, if Nepal shows undue sympathy towards Chinese sensitivity, such policy might backfire.

Dr. Anil Sigdel is the founding director at Nepal Matters for America in Washington DC, and also was among the founders of Nepal Policy Institute (NPI). Dr. Sigdel holds  a PhD and a Master degree in International Relations. He is the author of the book ‘India in the Era of China’s Belt and Road Initiative: How Modi Responds to Xi’. He is lecturer on international relations. 

Read about US-Nepal Relations at Nepal Matters for America here

Also read: Indo-Pacific Strategy: An Opportunity for Nepal

Also read the new post on Chinese investment in Nepal – Industrial Parkhere